Housing price growth in China's cities edges down: Westpac

Housing price growth in China’s tier-1 cities has slowed down slightly and the pace shows a passing of the baton from the centre to the regions, says Westpac’s latest China Property Update.

The 70-city house price update for the month of April highlights authorities’ tight management of the sector. 

Tier-1 city price growth continues to be reined in as price growth is sustained elsewhere. In April, the number of cities reporting price gains fell to 58 from 62 for new housing and to 61 from 64 for the established market. 

Both results are toward the upper end of the range seen over the past year, signalling price gains remain broad across the nation, said Westpac. Across the three tiers, the pace of annual price growth clearly shows a passing of the baton from the centre to the regions. 

Over the past year, annual price growth for new housing in tier-1 has decelerated from 31% per year a year ago to 14% year (17% year for established housing). 

“Whereas Shenzhen initially provided all of the impetus to this slowdown, now all of the tier-1 cities are experiencing decelerating price growth,” said report author Elliot Clarke.

However, Shenzhen has still (by far) seen the largest decline, from 62% year in April 2016 to 6% year currently. 

Growth in Tier-2 also slowed down, though on a much more modest level. Growth fell from 12% year in November to 10% year for new builds, while it fell to 8% per year to 10% in October for the established market. 

In contrast, price growth for tier-3 cities has held up, with annual growth currently around 9% yr for new homes and 7%yr for existing. 

Westpac noted that around a year ago, annual growth for this sub-set of cities was just 2% yr. From the above price trends, it is best to conclude that the actions of authorities have spread investor activity more broadly rather than halting it outright. 

This is most obvious in the opposing price trends for tier-1 and tier-3 cities – the latter’s’ frequent geographic proximity to the former combined with rapidly improving transport infrastructure arguably sparking growing investor interest. 

While growth in housing starts is modest, developers continued strong appetite for land suggests they remain optimistic on the outlook for the sector. 

“That said, they are likely to manage the supply of new housing to match demand and see moderate price growth (which doesn’t raise the ire of authorities) sustained,” said Westpac’s note.